Labor vs. Management

Dr. Peterson is Associate Professor of Eco­nomics at New York University and a weekly contributor to the Wall Street Journal.

Among many illuminating con­cepts picked up in Professor Lewis H. Haney’s course at New York University in 1950 on the history of economic thought was one he called "false separatism." Profes­sor Haney referred to the easy and frequently arbitrary divisions of economic activity economists are prone to make. Doubtless the divisions ease the job of rationaliz­ing what’s what and who’s who in the economic scheme of things and hence lighten the load of the econ­omist.

But Professor Haney was not one to swallow the blithe division. He criticized, for example, the cavalier manner with which econ­omists of the macro-economic school divide the "gross national product" into the "public sector" and the "private sector," and many other "sectors."

"False separatism," as an idea,kept popping into mind while reading Sylvester Petro’s master­ful synthesis and analysis of the McClellan Committee labor-man­agement hearings: Power Unlim­ited—The Corruption of Union Leadership (N.Y.: Ronald Press, 323 pp., $5.00). Professor Petro’s book describes in concrete and oftentimes shocking detail how unwilling employees are organized "from the top" by stranger picket­ing and secondary boycotts, how psychological warfare and blatant physical force are employed in "organizing campaigns," how vio­lence and the threat of violence take place under the name of col­lective bargaining.

Why Resort to Force?

Why, why, Professor Petro’s reader is prone to ask as he re­flects on page after page of the violence-strewn record of Ameri­can trade unionism in the last generation. Why compulsion at all in the labor market place, if the market is but the peaceful process of buyers and sellers engaging in voluntary exchange of goods and services? The essence of the mar­ket is voluntarism, the exercise of free will, the social maximization of satisfactions, peacefully, prac­tically spontaneously. A couple of boys swapping kites for yoyos constitutes a market. The swap is peaceful, and each boy is happier for the bargain. Contrast this with the animosity and vitupera­tion that mar the organized labor market today.

So why the division, the separa­tion—or to use a stronger word, the conflict—between buyers and sellers in the organized labor mar­ket? What is unique about this market as compared to the stock market, say, or the copper market, the clothespin market, the baby sitter market, or the Chinese laun­dry market? In virtually all mar­kets, save for that of organized labor (and others where govern­ment intervention or price-fixing exists), exchanges proceed volun­tarily and prices are freely estab­lished. No mass picketing, no shouts of "Scab!" no intimidation, no goon squads, no strikes, nobody parading up and down in front of Joe’s Butcher Shop saying Joe’s meat prices are too high or that Joe pays "starvation" rates for his beef and pork from the packer.

But, for some reason, sides are drawn between "labor" and "man­agement" (or "capital") and hos­tilities begin. Is this a delayed realization of the Marxian inter­pretation of the class struggle? Or is it an implementation of "false separatism" that we see in the strained and oftentimes vio­lent labor-management field?

Power Corrupts

Perhaps Professor Petro puts his finger on the real cause of the problem in the very title of his book, based as it is, on Lord Acton’s sage observation that "power tends to corrupt and ab­solute power corrupts absolutely." In his study, Professor Petro points out that government, both advertently and inadvertently, has armed organized labor with spe­cial privileges granted to no other branch of society. Organized labor has won enforced monopolies at the national level and tacit exemp­tion from obedience to the laws of private property and persons at the local level.

Such unlimited power has led to the inevitable corruption of the leadership of organized labor, not all union leadership to be sure, but much, far too much, of it. This then—privileged unlimited power—is the reason why the McClellan Committee uncovered the whole­sale invasion of gangsters, extor­tionists, racketeers, hoodlums—and in the words of Senator Cur­tis, "all sorts of bad actors"—in the trade union movement.

And yet, as Dr. Petro points out, the obvious target of corrupt union leadership, so eloquently criticized in the halls of Congress, is not the logical place to search for "labor reform." Attacks on thugs, racketeers, and power-hun­gry union leaders miss the real point, says Dr. Petro. The ousting of a Dave Beck leads, inevitably, to the Jimmy Hoffas, and so on ad infinitum.

"Why the Worst Get on Top"

Temptation to corruption is the thing to remove. Unlimited power must be withdrawn. Responsibil­ity must be restored. Rights of person and property must be re­established and protected. Create situations of power and privilege and in the scramble to occupy them the worst elements in society are bound to win—for the reasons advanced by F. A. Hayek in the celebrated chapter "Why the Worst Get on Top" in his The Road to Serfdom.

To be more specific, the trouble with American labor-management relations is the enforced monopoly granted labor under the Taft-Hartley Act and the Wagner Act. Under these laws, a company must deal with a government-certified union and no other. In short, there is no competition among unions. One, and only one, union is certi­fied to "represent" the workers at a particular company. Thus, by law, the XYZ union is "the exclu­sive bargaining agent" for the workers at the ABC corporation.

To be sure, the workers are sup­posed to have "democratically" elected the XYZ union at an NLRB election. But this in no way les­sens the existence of enforced monopoly. Moreover, as is abun­dantly evidenced in the McClellan hearings, much of what goes on in the name of democracy in trade unionism makes a mockery of the word. How democratic is it, for example, when a worker must join a union to get or hold a job, and is permitted to join only the certi­fied union with which the law per­mits the employer to deal? This is what a union shop or a closed shop means.

Enforced Monopoly

Enforced monopoly, then, is the taproot of the American labor-management problem. The free market for the American working­man has largely been placed out-of-bounds, save for some 19 states which have enacted "right-to-work" laws. Compulsion has be­come the rule for organized labor, compulsion sanctioned and encour­aged by the government, compul­sion drafted into a trade union strategy which eliminates the free market. Writes Professor Petro in this regard:

"[ Unions ] must in the first place compel all employees to join the union; they must in the sec­ond place compel all the employees to participate in their strikes, picketing, and boycotts; and they must in the third place, after their monopolistic conduct has created unemployment by pushing wages above the free-market level, use violence and coercion to keep the unemployed from bidding for jobs at lower rates than the unions have fixed."

The Market Is Misunderstood

Still, the question arises as to why the government has legalized, overtly or covertly, this apparatus of compulsion, why it has in effect encouraged the sharp division, the wide separation, of partners in production into hostile groups. The answer is, mainly, that there is a widespread misunderstanding of the efficacy of the free market.

In the popular mind, unorgan­ized employees are weak, em­ployers strong, and so the lopsided bargaining scale must be bal­anced. On the surface, the prem­ise appears true, although his­tory, logic, and contemporary evi­dence do not support it. Who are the real employers: companies or consumers? A few minutes of straight thinking about the prob­lem make it plain that it is con­sumers who really hire workers and pay their wages. Companies are merely the intermediaries, the hirelings of society, or what Haney called the "social paymasters." If a company ceases to produce the goods people want at prices they can afford to pay, it goes out of business. Consumers in effect hire (and fire) entrepreneurs and set wages, which originate solely from production.

Yet, who are the consumers? Everybody. And, in numbers, con­sumers are overwhelmingly workers. Therefore, ironically, strikes, violence, attacks on labor­saving equipment, and all other phases of compulsion are labor’s assaults on the income and well­being of labor—a nice case of so­cial masochism.

. . . and Distrusted

In labor-management relations, the free market is, to put it mild­ly, distrusted, though not nearly so much on management’s side. The free market is even accused of depressing wages, which is anything but the truth. The truth is that unions, for all their vast power, are powerless to increase over-all wages. The truth is that over-all wages can rise only with the increase of capital investment, and then only if the increase of capital investment is greater than the growth of the labor force. Yet, such truths are unappre­ciated in the halls of government and in many other centers of in­fluence—in most churches and schools, for example. Hence, the march of "false separatism"—wages vs. profits, labor vs. man­agement, or, in Marxian terms,proletariat vs. bourgeoisie. Such induced hostility is misguided, misconstrued, and completely un­warranted.

As Sylvester Petro concludes in true libertarian spirit, only a re­turn to the free market, to free and responsible trade unionism, can improve the situation.

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Ideas on Liberty

A Corresponding Duty

William Graham Sumner, What Social Classes Owe to Each Other

There is a beautiful notion afloat in our literature and in the minds of our people that men are born to certain "natural rights." If that were true, there would be something on earth which was got for noth­ing, and this world would not be the place it is at all. The fact is, that there is no right whatever inherited by man which has not an equivalent and correspond­ing duty by the side of it, as the price of it. The rights, advantages, capital, knowledge, and all other goods which we inherit from past generations have been won by the struggles and sufferings of past genera­tions; and the fact that the race lives, though men die, and that the race can by heredity accumulate within some cycle its victories over Nature, is one of the facts which make civilization possible. The struggles of the race as a whole produce the posses­sions of the race as a whole. Something for nothing is not to be found on earth.